Are you eligible for a PPI refund?
Payment protection insurance (PPI) was mis-sold to millions of customers. Find out if you're eligible to claim compensation.
Banks and building societies have set aside more than £12 billion to compensate customers who were mis-sold payment protection insurance (PPI) - and you could be entitled to a share.
Lloyds TSB has added a further £1 billion to settle PPI mis-selling claims, bringing its total PPI bill to just under £5.3 billion. HSBC has increased its PPI provision by £220 million, pushing its total PPI bill to £1.32 billion. And Barclays has just set aside a further £700m, taking its PPI bill to £2bn
Here, we explain what you should do if you think you are a victim of PPI mis-selling.
Why was PPI so widely mis-sold?
PPI used to be routinely sold alongside credit cards, store cards and loans, with the aim that it would provide cover if consumers were unable to meet their monthly repayments.
It raked in huge amounts of money for the UK's high street banks and, at one point, represented their biggest single source of profit.
However, many customers weren't informed that the cost of PPI was being added to their loan repayments, and in some cases the policies were sold to people who would never have been eligible to claim on them.
For example, most PPI policies included unemployment cover. If you didn't work, were self-employed or retired at the time the policy was sold to you, then this element of the cover would have been of no use to you, and you would almost certainly have a case for mis-selling.
When did it first emerge that there was a problem with PPI?
Increasing numbers of people started to complain that premiums for cover had been deducted without them even knowing about it, or that they weren't eligible to make a claim. Consumer groups such as Which? and Citizen's Advice then took up the issue, before the Financial Services Authority (FSA) got involved and laid down new rules on how PPI should be sold.
The FSA also said that lenders should re-assess any complaints they'd received in the past and review all their previous PPI sales. The banks challenged this in the High Court in April last year, but were unsuccessful and are now having to compensate all PPI customers who were mis-sold cover.
How many people are affected?
Around 16 million PPI policies have been sold in the past seven years, and millions of these may have been mis-sold. We are unlikely to know exactly how many people have been affected for several years to come, as there is currently no time limit on when claims for PPI compensation must be submitted.
Of course, some of these policies will have been correctly sold, so not everyone with a PPI policy will be eligible for compensation. According to the Financial Ombudsman Service, which deals with complaints that banks have turned down, so far, it has received half a million PPI complaints, with 100,000 of these made in the first six months of 2012 alone.
Can I make a claim for mis-sold PPI?
If you have been sold a PPI policy in the past and it wasn't properly described to you at the time, or you didn't realise you were taking out a policy, then you may have been mis-sold.
Banks are writing to customers to inform them that they may have been mis-sold PPI, but if you don't receive a letter that doesn't necessarily mean you aren't a victim of mis-selling.
If you think you have a legitimate claim, try to track down any paperwork you might have that shows payments for PPI and send copies of this, and any other information which can prove this cover wasn't right for you, or wasn't explained properly to you when it was sold, to the bank.
The average compensation paid is £2,750 so it is well worth making a claim if you feel you have a case.
What if I don't have any paperwork?
You may still be able to make a claim without paperwork. Get a copy of your credit file from one of the credit reference agencies, CallCredit, Experian or Equifax, as this will show details of any loans or credit cards you have had in the past six years.
You should then contact any of the providers shown on these records to ask if PPI was sold alongside any cards or loans you had with them. You can also make a claim if you took out PPI longer than six years ago, although if you don't have any paperwork your claim is less likely to succeed, as banks are only required to keep information about loans or cards for six years.
What if my bank refuses my claim?
If your bank has refused to compensate you and you are not happy with their explanation, you can take your case to the Financial Ombudsman Service (FOS).
You must do this within six months of being turned down by your bank, and you must have given your bank eight weeks to respond to your complaint.
Can't I get a claims management company to manage my claim for me?
You've probably been sent spam text messages, emails or received calls encouraging you to make a PPI claim. These are from claims management companies looking to exploit and cash in on the PPI mis-selling scandal.
Regardless of what they tell you, you do not have to use one of their firms: they just want to take a cut of any compensation you receive – typically about 25%. Some take even more and others will charge you an upfront fee. But they can't do anything for you that you can't do yourself. Try and make the claim yourself, and if you are unsuccessful, go to the Financial Ombudsman Service for help.
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